SAN FRANCISCO—Around this time last year, market watchers were digesting the surprise news that Bristol-Myers Squibb and Celgene had struck a megamerger deal.
While 2020 hasn't started in similar style, a report from EY's experts suggests M&A the rest of the year should be just as strong as last—but this time around, biotech and medtech could play a bigger part. And with $1.4 trillion in dealmaking firepower at hand, the healthcare industry can certainly afford it.
In all, 2019 featured $357 billion worth of deals, breaking a record set back in 2014. Medtech and biotech largely stayed away from M&A last year, though, EY says, leaving Big Pharma to drive the action. This year, the experts predict both sectors will strike some M&A deals of their own.
Looking ahead, the trends that drove last year’s pharma spree remain in place, EY says. Drugmaker companies want to beef up in certain therapeutic areas—while others want to sell out. Plus, companies large and small need new sources of current revenue and new drug candidates to add to their pipelines.
Plus, the financial wherewithal to continue the dealmaking trend is in place, EY says. Life sciences companies currently have the ability to fund $1.4 trillion worth of deals, whether in cash, liquid assets, access to debt or market capitalization, according to the report.
While the dollar amount of M&A reached a record in 2019, the deal volume was actually down 14% compared with 2018, EY reports. Valuations were high last year, so medtech and biotech companies remained quiet.
Major M&A deals struck last year stand to reshape the industry moving forward, but plenty of midsized agreements went through, too. To jumpstart the year, Bristol-Myers Squibb and Celgene unveiled their megamerger in early January, dominating chatter at the J.P. Morgan Healthcare Conference. And AbbVie inked its Allergan buyout in June. Together, those deals were worth $137 billion.
The start in 2020 has been slower. So far, Eli Lilly has the industry’s main buyout in last week’s purchase of Dermira for $1.1 billion. With that deal, Lilly gets the already marketed Qbrexza to treat excessive underarm sweating, and pipeline candidates that include a phase 3 atopic dermatitis med, lebrikizumab, touted as a rival to Regeneron and Sanofi's Dupixent.